Request for Proposal (RFP) is the process by which a corporate department or government agency prepares bid documents to acquire equipment or services. RFPs are frequently published in the legal documents section of pertinent newspapers or in trade journals covering the industry in which the department operates. The RFP can also be distributed to a list of qualified potential bidders that have already been contacted and prequalified as eligible by the agency or department. "Qualified" is a key word in answering or preparing any RFP. Qualification frequently depends on follow-up investigation on the part of the hopeful bidder, and careful wording of the original RFP.
RFPs are primarily associated with government agencies, since their responsibility to get equipment and consulting talent under the most beneficial circumstances possible is closely monitored by the press and tax watchdogs. Some private companies also employ RFPs, though, usually when purchasing commodities or services that do not bear directly on the company's own products or services.
Some RFP work requests are of a scale beyond the scope of small or mid-sized companies, but others provide such businesses with valuable opportunities to expand their client base and operations. Before bidding on an RFP, however, entrepreneurs and business owners should make sure they fully understand the nature of the work request.
For instance, some RFPs are decidedly more informative than others. When scanning an RFP, vendors should make certain that it specifically describes what needs to be delivered or executed to fulfill the needs of the company or agency that posted the notice. In order to do so, it is often necessary for potential vendors to educate themselves about the nature of the agency or corporation that has submitted the RFP. Vendors should also inquire whether the work request could translate into additional work on associated projects down the line. For instance, if the equipment will eventually be networked to a building that is not yet built, but is in the long range plans of the agency or company, a vendor may decide that a low price on the initial RFP is viable if it advances its prospects for a more long-term arrangement down the line.
Before making any bid, vendors should also check the RFP for other factors that might influence their response. Some possible questions follow:
Most companies and agencies that submit work requests provide prospective bidders with ample time to study the RFP before the deadline. Some companies give vendors as much as one month from the time the RFP is published before the bids are due. This allows bidders time to tinker with their bids, possibly allowing them to seek out new vendors of their own to help meet the needs of the RFP.
Companies wishing to bid on RFPs should monitor the legal notices in local newspapers and trade magazines, and contact the purchasing departments of corporations and government agencies likely to request services and equipment. They should investigate the requirements to be added to the "bid list." Finally, once the company has fulfilled all obligations necessary to be added to the list, the company's leadership needs to make certain that it stays on that list.
Government agencies and corporate departments are sometimes reluctant to delete vendors from bid lists because of fears that such cuts will elicit favoritism charges. Nonetheless, establishments submitting RFPs do seek to keep bid lists to manageable size, since every bid requires scrutiny. One favored way to keep the bid list down is to require potential vendors to refile every few years. Another is to ask vendors to provide certain information about their companies, such as past sales and experience or number of employees available to service the account. Such requirements cull the number of bidders down, eliminating companies that are too disorganized or feeble to keep up. Conversely, a small business that meets all such requirements in a timely fashion is essentially serving notice that it has its act together.
Companies seeking RFP business should also be cognizant of the fact that winning bids are not always exclusively a matter of providing the lowest cost or the highest level of customer service. Some corporations and government agencies give special consideration on their bid lists to minority-and women-owned companies.
Harrington, Lisa H. "The RFP Process: How to Hire a Third Party." Transportation and Distribution. September 1998.
"Preparing Your Request for Proposal." Association Management. July 2000.
Stein, Murry. "Don't Bomb Out When Preparing RFPs." Computerworld. February 15, 1993.
SEE ALSO: Competitive Bids